Young workers are losing thousands of dollars in retirement savings under rules which lock them out of the superannuation system, according to a new Industry Super Australia (ISA) report.

Figures published by ISA on Tuesday revealed about 375,000 Australian workers under 18 are losing a combined $330 million a year in super contributions because they don’t work more than 30 hours per week for the same employer.

Industry Super Australia chief Bernie Dean called on the federal government to change the laws, saying Australians are being penalised early in their careers by the “unfair” rules.

“This is an out-of-date law that discriminates against our youngest workers just as they’re starting out – it’s unfair and the law needs to be modernised,” Mr Dean said on Tuesday.

“Locking thousands of teen workers out of our world-class retirement savings system is not giving them the super start to work they deserve.

“How can we explain that young workers don’t get super while an older colleague doing the same job does?”

Rules hurt young workers

Originally, many young workers were carved out of the super system due to fears that fees and insurance would erode their smaller super balances.

But in the decades since the inception of Australia’s compulsory superannuation system, fees have been capped on lower account balances and insurance is not automatically included for under-25s.

That changes the calculus for many younger workers, about 90 per cent of whom usually work less than 30 hours per week and are thus not receiving any compulsory super contributions.

About 75 per cent of teens work some hours per week, Industry Super Australia said, with the majority working most of the year.

“Removing the 30-hour threshold wouldn’t just be fair for young workers, it would be good for the employers who have to face the administrative nightmare of keeping track of the weekly hours of a highly casual workforce,” Mr Dean said.

ISA modelling shows that young workers, on average, would get an extra $885 a year in super contributions if the laws were reformed.

By retirement age that boost would be worth about $10,200, based on ISA modelling of the reforms against super returns.

Young people unaware of restrictions

A survey of 1075 people commissioned by ISA found “near universal support” for paying superannuation to all workers, ISA said, with 85 per cent of respondents agreeing in principle it’s a good idea.

At a webinar on Tuesday afternoon, Tina Samardzija, a senior economic research adviser at ISA, said only 22 per cent of young people are even aware of restrictions on their super payments.

“Extending the super guarantee will mean that the average under 18-year-old would actually benefit from an extra $2,600 in super contributions for the work that they do up to 18-years-old,” she said.

Mr Dean said that young people often have things on their mind other than super when they first start working, meaning many continue to lack awareness about the impact of the rules on their super balances.

Ms Samardzija said there would be other benefits too, including removing existing discrimination from the system for young workers and removing a perverse incentive for employers to ensure staff under 18 are rostered hours that fall under the super threshold.

“There won’t be any incentive to structure rosters to avoid that 30-hour threshold.”